Groupon forced to change trading practices by OFT

By Peter Ruddick , 16-Mar-2012

Related topics: Business, Trends & Reports, Legislation, Restaurants, Hotels, Pubs & Bars

Voucher website Groupon has been forced to change some of its trading practices and how it interacts with merchants and businesses after an investigation by the Office of Fair Trading found 'widespread' examples of breached consumer regulations.

Voucher website Groupon has been given three months to change its trading practices by the Office of Fair Trading (OFT)

Voucher website Groupon has been given three months to change its trading practices by the Office of Fair Trading (OFT)

The OFT announced the company MyCityDeal Ltd, which trades as Groupon, complied fully with the investigation but has been given three months to implement changes.

A statement from the OFT confirmed it had specific concerns around Groupon’s practices involving reference pricing, advertising, refunds, unfair terms and its relationships with merchants, including restaurants and bars.

The investigation was launched last year following complaints from consumers who argued some of the available discounts were being exaggerated or were not available for as long as advertised.

Close monitoring

Cavendish Elithorn, senior director in the OFT's Goods and Consumer Group, said the organisation would ensure the announced undertakings were implemented or further measures such as court enforcement orders would be sought.

"Collective buying and discount schemes can offer real benefits for both consumers and merchants. The market is growing rapidly, but it's important that consumers benefit from consumer protection law as well as from the discounted offers," he said.

"Groupon has cooperated fully with our investigation and is making changes to its business practices to address our concerns. We will be monitoring the situation closely to ensure that consumers benefit from these improvements," Elithorn added.

The undertakings that Groupon has signed to change future practices ensure that:

  • Adverts that compare an original price against a discount are accurate
  • Groupon carries out a realistic assessment of the ability of businesses to provide the advertised quantity of goods or services in the advertised time frame
  • Products display clearly, before purchase any limitations which apply to any deal
  • Groupon takes reasonable steps to ensure that health or beauty product claims are substantiated
  • Terms and conditions are fair
  • Groupon applies refunds policies and cancellation rights in accordance with the Distance Selling Regulations

In December 2011 Groupon was also referred to the OFT by the Advertising Standards Authority (ASA) following its finding of breaches of UK advertising codes.

Too many customers

In response, Groupon said it was already making changes in all areas the OFT had expressed concern. On the relationship with businesses, Groupon claimed the problem had been many merchants, including hospitality businesses, were unfamiliar with how much business they could handle.

A statement on Groupon's UK website blog said: "It’s not uncommon for merchants to struggle with a lack of customers, but with Groupon’s popularity, some have faced a new challenge: what happens when you attract too many? The answer is bad experiences for customers – who sometimes can’t get a reservation for months – as well as merchants, who are overwhelmed by the stress."

The company said it would be working with businesses to allow them to determine voucher limits to make sure merchants could cope with fulfilling the offer. 

Apology

Groupon also apologised to customers and admitted it had, at times, failed consumers in the pursuit of growing the company.

"This self-evident value proposition has propelled Groupon into becoming what some have called the fastest growing company in history. While we’ve endeavoured to meet the massive public demand for our offers while maintaining our bar for service, there are times we’ve failed," Groupon said.

"To the Groupon customers that experienced the negative side effects of our growth: we’re sorry. We believe that the only way to build a company that lasts is to provide the best customer experience in the world, and it pains us when we fall short. Our commitment is this: we are going to get this right. We won’t stop until we are known for having the best customer service in the UK," Groupon added.

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